Hydro Tasmania criticised as state's energy crisis continues

As Tasmania battles through an unprecedented energy crisis, questions are being asked about whether renewable energy business, Hydro Tasmania, acted recklessly during the carbon tax period making the crisis much worse.

Transcript

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MATT WORDSWORTH, PRESENTER: Despite a rain-bearing storm about to hit Australia's east coast, things won't be looking up in Tasmania any time soon.

The clean, green, renewable energy state, which made an international mark in hydro-power, is currently relying on hundreds of dirty diesel generators to get through an unprecedented energy crisis.

It started in late December, when the underwater sea cable that provides power from Victoria to Tasmania broke; and the repair timeline for the cable remains extremely uncertain.

The state's biggest companies have radically scaled back production to conserve power, costing them tens of millions of dollars in lost revenue.

Questions are being asked about whether the state's renewable energy business, Hydro Tasmania, acted recklessly during the carbon tax period, making the crisis much worse.

Michael Atkin reports.

MICHAEL ATKIN, REPORTER: For six months, Tasmania has been battling to keep the lights on. The chilly winter is approaching - and demand for power is skyrocketing, as people crank up their heaters.

RAY MOSTOGL, BELL BAY ALUMINIUM (14 Apr.): We are living on an island and we are in a crisis.

MICHAEL ATKIN: Tasmania's dams have hit record lows and haven't been able to supply the state's electricity needs. Mother Nature has played a role in the crisis - but she's not the only culprit.

STEVE DAVY, CEO, HYDRO TASMANIA: We had a responsibility to ensure that we maximized the return for the state during the carbon price period.

MICHAEL ATKIN: Hydro Tasmania is a accused of selling too much renewable energy to achieve record dividends.

MARC WHITE, ENERGY CONSULTANT: We sold about half of the state's consumption back into Victoria over the period of two years. Whenever you're setting performance bonuses, whenever you are setting goals: you know, you've always got to look at the balance between risk and reward. And I think what we are seeing now is that we took a bit too much risk.

MICHAEL ATKIN: But Hydro Tasmania's profits would be short-lived. Record low rainfall last year has left Tasmania's dams running low.

STEVE DAVY: September, October, November were the driest spring period that Tasmania had experienced in recorded history.

MICHAEL ATKIN: Tasmania's back-up energy supply kicked in, with the Basslink underwater cable which allows the state to import coal-fired power from Victoria.

But in December, it was supplying 40 per cent of the state's electricity when it broke suddenly. And it hasn't been fixed.

STEVE DAVY: The day that the interconnector went out of service, we were - we were having to supply about 90 per cent of Tasmania's demand with hydro-power.

MARC WHITE: It's very confronting. It's such an enormous body of water - or it was. And to see it like this, you have to wonder how many years it's going to take to recover.

We think we're actually at the highest risk point of this crisis.

MICHAEL ATKIN: To avoid blackouts and power rationing, Hydro Tasmania has scrambled to find an emergency energy supply. At a cost of more than $58 million, it's installed and run hundreds of diesel generators, including here at Meadowbank Power Station.

(Steve Davy shows Michael Atkin around diesel generator installation)

STEVE DAVY: What we've got here is six containers. Each contain a large truck engine that's attached to a power generator. And in the middle here: this middle container has the transformer, which takes that power and effectively puts it into the grid.

MICHAEL ATKIN: Heavy industry has been hit the hardest by the crisis, slashing its energy use in confidential deals with Hydro Tasmania.

Rio Tinto's Bell Bay aluminium smelter has cut production by 10 per cent, telling a Federal Senate inquiry it's cost them international customers and $20 million in revenue.

RAY MOSTOGL (14 Apr.): Oh, we're taking a hit. It's as simple as that. This has sent shockwaves to our customers, as per other customers.

MICHAEL ATKIN: Recent heavy rainfall has seen dam levels rise to 22 per cent, easing the immediate pressure. However, for the crisis to be over, the Basslink undersea cable needs to be fixed - and that won't be easy.

IAN MACGILL, CENTRE FOR ENERGY AND ENVIRONMENTAL MARKETS, UNSW: They had considerable difficulty, of course, finding where the fault is. And now that they have found it: you know, it's a tear about the size of your thumb.

MICHAEL ATKIN: Repeated repair deadlines have been missed. The latest estimate is late June. But the cable ship, which is currently at sea, requires calm conditions for 20 days on a notorious stretch of water.

Tasmania will be counting the cost of the crisis for years to come, with some estimates the price tag could cost hundreds of millions of dollars.

Energy Minister Matthew Groom admits it was a mistake for Hydro Tasmania to let dam levels fall so low.

MATTHEW GROOM, TASMANIAN ENERGY MINISTER: I do think that the reduction of the prudent water management level that occurred was a mistake.

STEVE DAVY: The kinds of circumstances that we needed to be ready for have now changed.

We now know that it can be dryer than we had previously used in our modelling. And we now know that a Basslink repair can take much longer than we had planned for.